Chesapeake Energy: A big driller that's had some problems

Background

Chesapeake Energy is one of the largest natural gas drillers in Pennsylvania. It operates close to 800 active wells here and has also been fined more than $1 million for various violations.

The company has seen its share of problems.

Most recently Chesapeake is facing allegations it’s cheating Pennsylvania landowners out of royalty money. Chesapeake has denied this. However, its the subject of several class action lawsuits and an ongoing investigation by state Attorney General Kathleen Kane. The company was also recently subpoenaed by the U.S. Department of Justice, seeking information about its royalty practices.

Chesapeake is based in Oklahoma City, Oklahoma. On its website, the company bills itself as “the second-largest producer of natural gas” and “most active driller of new wells” in the country. Former CEO Aubrey McClendon founded Chesapeake in 1989. Both McClendon and Chesapeake’s political action committee have financially supported Governor Tom Corbett. The PAC gave the Republican $12,000 during the 2010 gubernatorial campaign. McClendon donated $5,000 that year, and also provided Corbett with an indirect $450,000 contribution during his 2004 campaign for attorney general.

In May 2011, the company was on the receiving end of the largest fine the Department of Environmental Protection had given out at that point (Range Resources has since received a larger fine). Chesapeake was fined for a February 2011 Washington County tank fire, and contaminating several drinking wells in Bradford County. Chesapeake voluntarily suspended hydraulic fracturing operations for three weeks in April and May 2011, after a Bradford County well spilled hundreds of thousands of gallons of fracking fluid.

In 2012 Chesapeake faced scrutiny for a controversial loan program allowing its CEO at the time, Aubrey McClendon, to borrow money against the company’s wells, and use that same funding to purchase additional stakes in those holdings.

In March, the Pitts­burgh Post-Gazette reported that Aubrey McClen­don was tak­ing out loans against the company’s West Vir­ginia hold­ings. This month, Reuters expanded the story by report­ing that this was hap­pen­ing in mul­ti­ple states: McClen­don has taken out more than $1 bil­lion in loans, using Chesapeake’s land hold­ings as col­lat­eral. And as Reuters doc­u­mented, he is using that money to expand his hold­ings in those very same wells. The cir­cu­lar loans — and the fact they weren’t dis­closed to share­hold­ers — raised ques­tions about whether McClendon’s mix­ing of his per­sonal and busi­ness deal­ings con­sti­tute a con­flict of interest.

McClen­don was able to pur­chase per­sonal stakes in Chesapeake’s wells through an ini­tia­tive called the “Founder Well Par­tic­i­pa­tion Pro­gram.” Chesa­peake shut the pro­gram downshortly after it became public.

McClendon resigned from the company in the spring of 2013. Former Anadarko executive Doug Lawler was named as Chesapeake’s new CEO.

He pledged to rein in costs and focus the company on financial discipline. Lawler conducted a ”comprehensive review” of the company — which resulted in hundreds of layoffs throughout the country including staff in Bradford County.

March 14, 2014

Latest Posts

February 20, 2015

More than 50 landowners have filed a federal lawsuit against Chesapeake Energy, according to the Pittsburgh Tribune-Review. It’s the latest in a slew of lawsuits directed at the Oklahoma City-based driller, alleging it fraudulently withholds gas royalty money. From the Pittsburgh Tribune-Review: Chesapeake, which has more than 700 producing shale wells in the state, declined [...]

January 23, 2015

Chesapeake Energy will pay $119 million to royalty owners in Oklahoma under a preliminary settlement that will go before a judge in April, according to The Oklahoman. The deal would resolve royalty disputes dating back more than a decade. Landowners accused Chesapeake Operating LLC of improperly withholding royalty money and charging them for the costs of processing [...]

December 31, 2014

One of the state’s biggest gas drillers, Chesapeake Energy has agreed to increase the amount it’s willing to pay to settle a class action lawsuit accusing the company of cheating landowners out of royalty money. Chesapeake has upped its offer to $11 million dollars after a federal judge threw out the company’s original agreement of $7.5 [...]

December 30, 2014

Our end-of-year countdown continues with the third and fourth most popular web stories.* This time, they’re both video features. In fourth place is our story about people blocked from public roads and public forests by security guards working for a gas company. Our third most popular web story is a follow-up with landowners who say [...]

November 24, 2014

Landowners who have been accusing natural gas driller Chesapeake Energy of stealing their money say Harrisburg is doing little to stop it. Most of the company’s Pennsylvania operations are in Bradford County. It’s a rural area stretching along the New York border; it has more Marcellus shale gas wells than any other part of the [...]

November 6, 2014

Chesapeake Energy has been subpoenaed by the federal Department of Justice, seeking information on its royalty payment practices to mineral owners. The company has been the subject of widespread complaints in Pennsylvania and other areas of the country where it operates. Landowners have accused Chesapeake of violating lease agreements and underpaying royalties. In a regulatory [...]

August 27, 2014

Pennsylvania Attorney General Kathleen Kane is reportedly widening her investigation into complaints of fraud from gas royalty owners. So far, the allegations have centered on the state’s biggest gas driller, Chesapeake Energy. Now sources tell Capitolwire that Kane’s office has issued subpoenas “throughout the energy industry” in Pennsylvania. It could suggest investigators are looking for background information or that [...]

July 16, 2014

Bradford County’s three commissioners have reached out to the federal Department of Justice, seeking its help investigating allegations gas driller Chesapeake Energy is cheating Pennsylvania landowners out of royalty money. As StateImpact Pennsylvania has previously reported, residents there have been complaining about the issue for more than a year and say they’re disappointed with what [...]

May 8, 2014

At the same time thousands of Marcellus Shale supporters were rallying on the steps of the state Capitol, House lawmakers were inside debating a thorny issue– how to ensure Pennsylvania landowners are being fairly paid for their natural gas. House Bill 1684 was the subject of a floor debate Tuesday, but there was no vote taken. The [...]

February 14, 2014

Governor Corbett is calling for an investigation into allegations of fraud against Pennsylvania’s biggest natural gas driller– Chesapeake Energy. Corbett sent a letter to Chesapeake’s CEO Doug Lawler, saying he has reached out to state Attorney General Kathleen Kane to investigate allegations the company is shortchanging landowners on natural gas royalty payments. “I have received complaints [...]